Now, BofA's leaders must decide how they'll bounce back. Will they try to save the promised dividend hike and save some face with long-suffering investors? Or will they choose to buy back shares while the stock price has trading below book value?

The prevailing belief on Wall Street is that BofA will try to save the dividend.

“We assume BAC will eliminate its buyback request and retain the dividend hike,” Morgan Stanley analyst Betsy Graeseck wrote in a note to clients this week.

However, there are advantages to preserving the buyback instead of the dividend.

It would retire millions of outstanding shares and increase earnings per share in the year ahead. It also would reduce the number of shares on which to pay future dividends. And buying back shares at a discounted price — which certainly applies to BofA today — is always prudent.

But losing the dividend hike would be a PR headache. CEO Brian Moynihan is now facing the possibility of twice promising shareholders a dividend boost and twice asking for a do-over. In 2011, the then-rookie CEO mistakenly indicated he planned to boost the dividend, only to have his plans struck down by the Fed. To pull back the dividend a second time is surely a distasteful option at this point.

Either way, BofA is facing more than just a numbers game. It also has to prove to federal regulators that its new capital plan is high quality.

It boils down to this: BofA has about $4 billion less under regulatory capital guidelines than it once thought. So that’s likely the minimum amount the bank will need to carve out. BofA could accomplish that by killing its once-planned $4 billion share buyback and preserving the dividend, which amounts to about $2.5 billion.

But Federal Reserve regulators will make a “qualitative” review, which could be problematic, considering regulators now are viewing the plans in the context of the mistakes that have just been made.

Citigroup recently had its capital plans rejected on qualitative grounds. And there's always the chance Fed officials could reject any payouts from BofA this year.

BofA in a securities filing acknowledges it will submit plans that include smaller payouts. But spokesman Jerry Dubrowski declined to comment on what that smaller payout will look like.